Housing policy risks ‘sting in the tail’ as new HRA freedoms combine with Right to Buy pilot

Councils received mixed messages on housing in the 2017 budget – with borrowing freedoms to help build more homes accompanied by a renewed threat of forced sales.

There was a cautious welcome for the chancellor Philip Hammond’s announcement that the government will increase the Housing Revenue Account borrowing cap for a limited number of councils.

However, there was concern that the government is pushing ahead with a pilot to test the idea of forcing councils to sell high value homes to fund an extension of Right to Buy (RTB) to housing association tenants.

John Bibby, chief executive of the Association of Retained Council Housing, a coalition of councils with HRAs, told Room151: “The announcement on HRA caps is a marked change in government policy.

“But authorities will need to know that if they build these new homes they are not going to be caught in the high asset value levy which would require them to sell the homes to fund the RTB extension.

“There is a sting in the tail unless the government is prepared to exempt the extra homes from the levy.”

Housing groups have long campaigned for caps on local authority HRAs to be completely lifted in a bid to boost housebuilding.

The government has so far resisted these calls, but this week the chancellor announced that borrowing caps would be raised in areas of “high affordability pressure” to allow councils to build more homes.

Local authorities will be encouraged to bid for the extra freedoms—which will be limited to a total of £1bn, spread across three years from 2019-20.

Rob Whiteman welcomed the symbolism of the move but questioned the effect it would have in helping the UK deal with its housing crisis.

He said: “Change to the HRA cap is a welcome and a previously non-negotiable move that could offer a glimpse of flexibility that should benefit authorities wanting to invest in building, but the cap of £1bn might not have a significant impact at the national level.”

Paul Dossett, head of local government at accountancy firm Grant Thornton, said: “It looks like a very small pot in total when compared to other housing initiatives announced in the budget and in other recent government announcements.”

He also called on the government to clarify what the government meant by areas of high affordability pressure.

“In our view the cap should be lifted for all housing authorities so they can plan holistically across the country to build the social housing that we need,” he said.

Lord Porter, chairman of the Local Government Association, said of the limited moves on HRA borrowing caps: “This is an important recognition of our argument about the vital role that councils must play to boost homes for local families in need and solve our housing crisis, but does not go far enough.

“If we are to get back to building 300,000 homes a year, then the government needs to ensure all areas of the country can borrow to invest in resuming their role as major builders of affordable homes.”

The chancellor also announced plans to press ahead with a £200m pilot extending the Right to Buy for housing association tenants in the Midlands.

Councils had hoped that the idea, along with many housing policy initiatives from former chancellor George Osborne, had been shelved after a scheduled pilot scheme failed to materialise.

But documents released alongside the budget by the Office for Budget Responsibility, said: “A small pilot scheme was due to run from January to May 2016 but was delayed to July due to the process of applications taking longer than expected and there being a longer lag between issuing instructions to solicitors and completions being achieved.

“A larger pilot was announced in Autumn Statement 2016 and was due to begin in April 2017. This did not take place. It has instead been replaced by a new pilot announced at this budget, due to run for one year from July 2018.”

Another housing initiative in the budget will see councils and new delivery bodies use new and existing land value capture mechanisms to fund up to 1m homes by 2050 in a corridor between Oxford and Cambridge.

In addition, New Town Development Corporations will oversee five new garden to be delivered through public-private partnerships.

The government also announced it will give local authorities the power to increase the council tax empty homes premium from 50% to 100%.

The Homes and Communities Agency will be beefed up with new investment and planning powers to intervene more actively in the land market.

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